Hinkle and Foran's Latest News

Insurance Companies Have Caused The Medical Malpractice Insurance "crisis"

Mon, 03 Sep 2007 13:11:33 GMT

Medical doctors are being squeezed. Managed care is limiting reimbursement rates while their costs continue to rise. As a result, doctors are ill equipped to handle the recent increases in malpractice insurance rates. This is a serious problem that merits serious discussion.

I was therefore disappointed to read last week’s guest column by Kathy Read. The column was a compilation of urban myths, inaccurate statistics and childish lawyer bashing designed to divert attention from the real concerns and true facts regarding this situation.

While I will address the insurance crisis directly, I must first respond to a few of the points Ms. Read attempts to make.

“Frivolous” medical malpractice lawsuits resulting in “runaway” juries are a myth. It has been 20 years since a Leon County jury returned a verdict against a physician. Malpractice cases are vigorously defended and even meritorious cases are hard, on a national basis only 23% of patients win their cases at trial. As an attorney who specializes in handling medical malpractice cases, I can assure you that we spend a tremendous amount of time and money screening cases. Only a foolish lawyer would take a weak malpractice case, and while there are certainly foolish lawyers, they don’t win these cases.

Insurance specialists report that companies are paying an average of approximately $30,000 per malpractice claim. When adjusted for inflation the industry reports only a 1.7% annual increase in payments over the last 6 years. Ms. Read cites statistics from a service that, according to the Wall Street Journal, collects information “unsystematically”, has “large gaps” in its data and ignores victories by doctors and hospitals.

According to the National Center for State Courts, there has been no change in the volume of medical malpractice cases in the last five years. Medical malpractice costs, as a percentage of national health care expenditures, are at an all time low, 0.55 percent.

So why are insurance rates spiraling out of control?

The Wall Street Journal and other such publications have reported that insurers are trying to recover losses they made as a result of past underwriting practices coupled with bad investments in the stock market. This already difficult situation was made worse by the events of September 11th and the collapse of Enron.

The insurance companies have responded to their investment losses by rapidly raising premiums and canceling coverage for doctors. This is a repeat of the “crisis” that hit in the mid-1970s and again in the mid-1980s when periods of overly aggressive insurance pricing were followed by drastically decreased returns on investment.

As reported in the Wall Street Journal, during the late 1980s and 1990s insurance carriers aggressively pursued malpractice business. This resulted in rate cutting. In Florida, the average malpractice premium actually dropped. Policies were being sold too cheaply with the expectation that investment returns would later make the transaction profitable. When the stock market fell carriers were caught, some with their shoddy accounting practices exposed.

It is incredible that Ms. Read would mention PHICO Insurance Company. This carrier was a leader in slashing prices, reportedly quoting coverage at 25 below other carriers. In an Enron-like scandal PHICO operations were taken over by regulators and charged with filing “completely inaccurate” financial statements. Pennsylvania insurance officials are quoted as saying the company served as a “cash cow” for officers and directors.

While lawsuits make a convenient target, there is nothing different about lawsuits today than when malpractice insurance premiums were stable.

To believe that jury verdicts or trial lawyers are responsible for this cyclical hardening of the insurance markets would require a belief that juries and trial lawyers have timed their “aggression” to precisely coincide with the insurance industry’s economic cycle, so that the aggression impacts just when the market turns hard.

In other words, one would have to accept the notion that juries and lawyers were aggressive in the mid-1970s, then non-aggressive for a decade, then aggressive in the mid-1980s, then non- aggressive for a decade, and now aggressive again. This is ludicrous. The cycle is created by underwriting and investment policies, not claims by malpractice victims. As an insurance executive quoted in the Wall Street Journal acknowledges, the crisis was “self-inflicted.”

Those who would distort the facts and perpetuate urban myths do nothing to help us resolve a very serious problem that requires serious answers. I submit that how to deal with the cyclical problem of insurance coverage should be one focus of the debate.

Donald M. Hinkle is a Board Certified Civil Trial Lawyer who has spent over 20 years representing the victims of negligence.

Tort Reform isn't the solution to rising insurance rates

Sat, 08 Sep 2007 17:50:54 GMT

Want proof that tort reform isn’t the solution to raising insurance rates? Look no further than Florida. We already have some of the most severe tort reform in the Country, and rates in Florida are still rising.

Why? Because insurance increases are due to industry and economic factors that tort reform does not address.

Just like today, in the late 1970s and late 1980s downturns in the economy, falling stock markets and irresponsible underwriting produced dramatically increased medical malpractice insurance rates. Instead of seeking insurance solutions doctors used their political muscle to pass “tort reform” measures that stripped patient rights.

After a decade of rate stability due to good economic conditions and a bull market, rates are again rising. Demands are being made for even more limits on “non-economic damages”, the compensation allowed those disabled and the families of those killed by medical errors.

Doctors who claim there is no limit to these “non-economic damages” in Florida are apparently ignorant of the laws they seek to change. Among the many unfair limits already in place:

The Florida Birth Related Neurological Injury Compensation Act provides that babies negligently brain damaged during labor and delivery cannot sue. Despite a lifetime of disability, often severe, they receive no compensation from the hospital or doctor causing their injury. Severely disabled children had their rights striped away by “tort reform” in 1988 but it has not slowed the increase in malpractice rates.
If a medical provider negligently kills an unmarried adult that has no minor children, their survivors cannot sue. If you are an unmarried adult, a medical provider will have no obligation to compensate your loved ones if you are killed by malpractice. Under Florida’s malpractice law, “widows are worthless.”
In every other medical malpractice case in Florida, if a defendant demands arbitration non-economic damages are “limited to a maximum of $250,000 per incident and shall be calculated on a percentage basis with respect to capacity to enjoy life, so that a finding that the claimant’s injuries resulted in a 50% reduction in her or her capacity to enjoy life would warrant an award of not more than $125,000 non-economic damages.” A patient rejecting arbitration can go to an expensive jury trial with cap of only $350,000. These are the most severe caps in the nation and have not been adjusted for inflation since their enactment in 1988.
Doctors who provide negligent care to indigents cannot be sued.
Doctors who work for the government cannot be sued and government owned hospitals can only be sued for $100,000 per person, a limit on both economic and non-economic damages.
Every medical malpractice award in Florida is subject to “close scrutiny” by the Courts to insure reasonableness, and judges reduce excessive jury awards. Money the patient received from others, including disability insurance or other “collateral sources” reduces their recovery. Awards for future loss can be paid over time.
Doctors and hospitals providing emergency services can only be sued if they acted in “reckless disregard for the consequences” of their actions, a very low standard of care adopted in 1988.
Joint and several liability was abolished in 1999, part of a tort reform measure our current governor promised would reduce insurance rates. Thus, negligent doctors can escape liability by blaming others (usually the nurses).
Before filing a claim the patient’s lawyer must have experts review the case and testify to negligence. If an unsupported case is filed the lawyer is personally liable for the doctor’s attorney’s fees.

When it comes to “tort reform” Florida has “been there, done that” and it hasn’t solved the insurance rate problem. More tort reform will only injure patients, protect negligent doctors and insure that next recession we’re right back where we are today.

Arbitrary “one size fits all” limits and caps are unjust, unfair and ineffective in lowering insurance rates.

Doctors should realize their emotional response to lawsuits is being used to help insurance companies avoid real reform, the insurance reform that will stabilize rates and, more importantly, the compensation reform that will allow doctors and hospitals maintain reasonable revenues.

The tools of scientific analysis that doctors mastered so well during their education would lead them to the right conclusion about the cause of their current problems, and the proper solution: According to the Robert Wood Johnson Foundation, “studies that take a retrospective look at the malpractice reforms of the 1970s and 1980s are casting serious doubt upon the efficacy of tort reform in addressing the problem of high malpractice insurance rates.”

If you don’t believe it, just look at Florida.

Donald M. Hinkle is a Board Certified Civil Trial Lawyer who has spent over 20 years representing the victims of negligence.